CONTROLLING

Controlling

– The process of measuring performance,

comparing the actual performance with
standards and taking action to ensure desired
results.
– Has a positive and necessary role in the
management process.
– Ensures that the right things happen, in the
right way, at the right time.
Management - Chapter 8 2
Control Process

 Steps in the control process:

– Step 1 — establish objectives and standards.
– Step 2 — measure actual performance.
– Step 3 — compare results with objectives and
standards.
– Step 4 — take corrective action as needed.
Management - Chapter 8 3
Figure:1 Four steps in the control process.

Management - Chapter 8 4
Contd.

 Step 1 — establishing objectives and

standards
– Output standards
• Measure performance results in terms of quantity,
quality, cost, or time.
– Input standards
• Measure effort in terms of amount of work
expended in task performance.
Management - Chapter 8 5
Study Question 4: What is the
control process?

 Step 2 — measuring actual performance

– Goal is accurate measurement of actual
performance results and/or performance efforts.
– Must identify significant differences between
actual results and original plan.
– Effective control requires measurement.
Management - Chapter 8 6
Contd.

 Step 3 — comparing results with objectives

and standards
– Need for action reflects the difference between
desired performance and actual performance
– Comparison methods:
• Historical comparison
• Relative comparison

Management - Chapter 8 7
Contd.

 Step 4 — taking corrective action

– Taking action when a discrepancy exists
between desired and actual performance.
– Management by exception
• Giving attention to situations showing the greatest
need for action.
• Types of exceptions
– Problem situation
– Opportunity situation

Management - Chapter 8 8
Types of Control

 Feedforward controls …
– Employed before a work activity begins.
– Ensures that:
• Objectives are clear.
• Proper directions are established.
• Right resources are available.
– Focuses on quality of resources.
Management - Chapter 8 9
Contd.

 Concurrent controls …
– Focus on what happens during work process.
– Monitor ongoing operations to make sure they
are being done according to plan.
– Can reduce waste in unacceptable finished
products or services.

Management - Chapter 8 10
Contd.

 Feedback controls …

– Take place after work is completed.

– Focus on quality of end results.

– Provide useful information for improving future

operations.

Management - Chapter 8 11
Figure:1.1 The role of feed forward,
concurrent, and feedback controls in
organizations.

Management - Chapter 8 12
Techniques of Control

•Break –Even Analysis

• Inventory Control
•Statistical Quality Control
• PERT and CPM
• Responsibility Accounting
•Return on Investment

Management - Chapter 8 13
Contd.

 Break-even analysis …
– Determination of the point at which sales
revenues are sufficient to cover costs.
– Break-Even Point = Fixed Costs / (Price –
Variable Costs)
– Used in evaluating:
• New products
• New program initiatives

Management - Chapter 8 14
Figure 1.2 Graphical approach to break-even
analysis.

Management - Chapter 8 15
Contd.

 Inventory control
– Goal is to ensure that inventory is just the right
size to meet performance needs, thus
minimizing the cost.
– Methods of inventory control:
• Economic order quantity
• Just-in-time scheduling

Management - Chapter 8 16
Contd.

 Statistical quality control

– Quality control involves checking processes,
materials, products, and services to ensure that
they meet high standards.
– Statistical quality control involves:
• Taking samples of work.
• Measuring quality in the samples.
• Determining the acceptability of results.
Management - Chapter 8 17
 COPYRIGHT
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